MARK 3001 Exam 2 Study Guide

the four core differences between a service and a good

Intangible: Cannot be touched, tasted, or seen like a pure product can

• Challenging to convey the benefits of a service to customers (Ex. Doctor, dentist, lawyers)

Inseparable: Services are produced and consumed at the same time

• Examples: Haircut, theme park experience, hotel stay

Variable/Variability in the service’s quality: Offering different services/experiences based on the customer

• Examples: men’s and women’s haircuts, hotel for business or leisure

Perishable: the service cannot be stored for use in the future

two main categories of innovation

Continuous Innovation: Limited effect on consumption patterns, new models with no customer learning curve

Discontinuous Innovations: So new that consumers have never known anything like it before (paradigm shift)

List, define, and graph the five categories of the diffusion of innovation

Innovators (2.5%): Buyers who want to be the first on the block to have the new product or service

• Movie Example: Reads industry news, knows what movies are currently in production, will pre-order tickets to see in theaters

Early Adopters (13.5%): Not as risky as innovators, but wait and purchase the product after careful review (don’t just buy based on the “name”)

• Move example: will wait for reviews to come out, but will see movie in theaters

Early Majority (34%): Members of this group don’t take much risk, wait until the bugs are worked out of a product or service

• Movie Example: Will wait for the movie to come out on streaming

Late Majority (34%): The last group of buyers to enter a new product market; at this point, the product has achieved its full market potential

• Movie Example: will watch film years after it came out, will answer “no” to the question “you haven’t seen ___ yet?" and then will watch it

Laggards (16%): Consumers who avoid change and rely heavily on traditional products until they are no longer available

• Movie Example: Will watch when the movie is on regular television networks or terrestrial tv (antenna)

Which is the most important group for an innovation to be successful in the marketplace?

Early Adopters

List, define, and graph the four stages of the product life cycle.

Introduction Stage: Usually starts with a single firm, innovators are the ones to try the new offerings

• Ex: Walkman (Sony, 1979), Internet Browser (Netscape, 1994)

Growth Stage: Marked by a growing number of product adopters, rapid growth in industry sales, and increases in both the number of competitors and the number of available product versions

• Ex. Market becomes more segmented, consumer preferences more varied

Maturity State: Characterized by the adoption of the product by the late majority, intense competition for market share among firms

• Ex. Market costs increase as firms defend market share against competitors

Decline Stage: Firms either position themselves as niche products (for diehard consumers) or exit the market

Which is the most important stage in order for a product to be successful?

The majority Stage

We discussed five types of branding strategies. List, define, and recognize examples of each.

Manufacturer Brands: Also called national brands, are owned and managed by the manufacturer

• The manufacturer develops merchandise, produces it, and invests in marketing

Private-label Brands: Also called store brands, house brands, or own brands, are products developed by retailers

• Can be made by the retailers themselves, or made by manufacturers who produce both national brands and private-label brands

Premium Brands: Offer the consumer a private label that is comparable to, or even superior to, a manufacturers’s brand quality (Kroger’s Private Selection, President’s Choice)

Generic Brands: Target a price-sensitive segment by offering a no-frills product at a discount price

• Not as popular as other private-label categories, as consumers need at least some measure of quality

Copycat Brands: Imitate the manufacturer’s brand in appearance and packaging, generally are perceived as lower quality, and are offered at lower prices

What are the two ways that a firm would name a brand?

Family Brands: A firm uses its own corporate name to brand all its product lines and products; the individual brands benefit from the overall brand awareness associated with the family name

Individual Brands: Each product has its own name, individual identities

Define and provide examples of brand extensions and line extensions.

Brand Extension: Using the same brand name in a different product line, an increase in the product mix’s breadth

• Colgate: Toothpaste, toothbrushes, Dental floss

Line Extension: The use of the same brand name within the same product line, which increases the product line’s depth

• Ex. Hidden Valley Ranch: Different flavors

What is brand fatigue?

Refrain from extending the brand name to too many products and product categories

What is co-branding, and who benefits most from a co-branding relationship (the higher- or lower-quality brand?). What must the higher-quality brand consider when entering in a co-branding relationship?

*The practice of marketing two or more brands together, on the same package, promotion, or store

• Benefits: Links from quality brand can enhance less well-known brand

• Two brands, one product

What are the definitions of supply chain and reverse supply chain?

Supply Chain: The total series of companies, exchanges, and transactions that produce goods and make them physically and commercially available to consumers

Reverse Supply Chain: when merchandise flows backwards through supply chains from consumer to producer

Define and provide examples of indirect and direct retail supply chains

Indirect: Utilize one or more marketing intermediaries to get products from producer to consumer

Direct: Producers selling directly to consumers (e.g. Online Retailers, large multinational firms having company-owned stores)

What is the difference between push and pull supply chain?

Pull: Orders for merchandise are generated at the store level on the basis of sales data captured by POS terminals

Push: Merchandise is allocated to stores on the basis of forecasted demand

What is just-in-time inventory? What are the pros and cons?

*Also known as quick response systems, are inventory management systems designed to deliver less merchandise on a more frequent basis than traditional inventory systems

Pros: Reduction in lead time (time between order placement and order fulfillment)

Cons: May not have enough time to meet sudden demand

Define and provide examples of the three distribution intensities

1. Intensive distribution Strategy: Place products in as many outlets as possible

2. Exclusive Distribution Strategy: Only selected retailer in select regions can sell a brand

3. Selective Distribution Strategy: Place products in a few specific retailers - in between intensive and exclusive

What is the definition of price from a marketing perspective?

*The overall sacrifice a consumer is willing to make to acquire a specific product or service

What is reference pricing? Anchoring pricing? Be able to provide examples.

Reference pricing: the price that a person expects to pay for a product

Anchoring: Cognitive bias where a person’s decision is influenced by a reference point (anchor)

What is the difference between inelastic and elastic pricing?

Inelastic: Market is not price sensitive; price changes do not change quantity demanded

Elastic: Market is price sensitive, small changes in price will generate large changes in quantity demanded (lower price = increased demand, high price = decreased demand)

What is the substitution effect?

Refers to consumers’ ability to substitute other products for the focal brand

• The greater the availability of substitute products, the higher the price elasticity of demand (eg. customers will leave you)

What is the difference between market penetration and price skimming? Be able to define and provide examples of each

Market Penetration: Set the initial price low for the introduction of the new product or service

• Streaming service pricing

Price Skimming: Appeals to segments of customers (innovators, early adopters) who are willing to pay the premium price to have the product first

• Apple products

Monopolies

One firm provides the product or service in an industry, little (or no) price competition

What is cross-shopping? Be able to provide an example

*Buying both premium and low-priced goods, shopping at expensive and price-oriented firms

• Walmart

What is the relationship between marketing and sales?

Marketing: spreads the message , increases brand awareness, tells you what the product does and who it competes with

Sales: Closes the deal, helps answer customer questions, determines if the product can actually help the customer

What is noise in the communication process?

Any interference that stems from competing messages, a lack of clarity in the message, or a flaw in the medium

Define each step of the AIDA model

Awareness: gaining attention of the consumer

Interest: Does the consumer care?

Desire: Moving from “I like it” to “I want it”

Action: Continue the search further (eg. prompted from a commercial to visit a website) or purchase

Define frequency and reach

Part of Traditional Media

Frequency: How often the audience is exposed to a communication within a specified period of time

Reach: The percentage of the target population exposed to a specific marketing communication

What is the difference between push and pull promotions? (this is different from push and pull supply chain)

Push: “Taking the product to the customer”

• Packaging design to encourage purchase

Pull: ”Getting the customer to come to you”

• Sales promotions and discounts

Informative Advertising

Used to create and build brand awareness, with the ultimate goal of moving the customer through the buying cycle to a purchase

• Generally occurs in the early states of the product life cycle

What is the difference between puffery and deceptive advertising?

Puffery: The legal exaggeration of praise, stopping just short of deception, lavished on a product (not overt)

Deceptive advertising: False or misleading claims; a message that omits information that is not important in influencing a consumer’s buying behavior and is likely to mislead consumers acting “reasonably”

Define product placement.

Firms pay to have their product included in nontraditional situations

What is the difference between order taking and order getting?

Order-taking: Process routine orders, doesn’t really sell the customer additional products or services

Order getting: Identify and engage potential customers to make the sale, sells customers additional purchases

What is the definition of polysynchronous consumption?

The near constant integration of brand information to and from peers and brands through multiple channels of communication

Define and provide examples of paid, earned, and owned media

Paid: Paying to display marketing advertisements across social media platforms, search engines, and websites

Owned: Digital content created by your company and housed on the company’s website, blogs, emails, and social media posts

Earned: public exposure of a firm’s marketing through word-of-mouth, customer reviews, social media mentions, etc.

Define and provide examples of the 4 E's of social media

Excite the customer: throughout their experience/personalized offers

Educate the customer: Sell the product’s value proposition and offered benefits

Experience the product: Provide information about a firm’s goods and services

Engage the customer: can include likes, comments, reactions

Define and provide an example for the following: evergreen content, SEO (and know what it stands for), native advertising, impressions

Evergreen: Content is always relevant (eg. lists)

SEO: Search engine optimization (eg. keywords optimization)

Native Advertising: A method of advertising in which the advertiser attempt to draw attention to a message by providing content that is consistent with the user’s experience (advertising as a disguise)

Impressions: The number of times that your posts have been seen by users (# of likes, views, comments)

List and define the five global market entry strategies discussed in class.

1. Exporting: sending products to another country to sell - partner with international retailers/sellers

2. Licensing/Franchising: Partner with a local (in-country) firm to use your firm’s business model/brand/strategies to sell in the foreign country

3. Partnering/Strategic Alliance: Partner with a company in-country to develop and sell your products

4. Acquisition: Purchase an existing in-country company and take over their business operations

5. Direct Investment/Greenfield venture: Establish a new venture in-country from the ground up

value-based pricing

Setting prices that focus on the overall value of the product offerings as perceived by the consumer

cost of ownership

Consumers may pay more for a product because the overall lifetime cost will be lower

everyday low pricing

Companies stress the continuity of their retail prices at a level somewhere between the regular, non-sale price and the deep-discount sale prices for their competitors may offer

high-low pricing

Relies on the promotion of sales, during which prices are temporarily reduced to encourage purchases

prestige pricing

Consumers purchase for their status rather than their functionality

quantity discounts

Discounts based on purchase quantity, size discounts

seasonal discounts

Price reductions offered on products and services to stimulate demands during off-peaks seasons

coupons

Offer a discount on the price of specific items when they are purchased

rebates

Discounts off of the final price, but the manufacturer (not the retailer) issues the refund as a portion of the purchase price returned to the buyer in the form of cash

price bundling

Selling more than one product for a single, lower price

leasing

Consumers pay a fee to purchase the use of a product for a specific amount of time

loss-leading/leader pricing

Aggressively pricing and advertising a regularly purchased item, often priced at or just above the store’s cost

bait-and-switch pricing

Stores lures customer in with a very low price on an item (the bait), only to aggressively pressure these customers into purchasing a higher priced model (the switch)

price discrimination

When a firm sells the same product to different resellers (wholesalers, distributors, or retailers) at different prices

price fixing

Colluding with other firms to control prices

oligopolistic Competition

A few firms dominate, prices change in reaction to competition

monopolistic competition

Occurs when there are many firms competing for customers in a given market but their products are differentiated

pure competition

Large number of sellers of standard products or commodities that consumers perceive as substitutions

Persuasive Advertising

Communication used to motivate consumers to take action

• Generally occurs in the later stages of the product life cycle

Reminder Advertising

Communication used to remind or prompt repurchases

• Generally occurs in the maturity stage of the life cycle